AGENDA ITEM 8-F
ACTION ITEM
TO:
CHAIRMAN ZIMMERMAN AND THE VRE OPERATIONS BOARD
FROM:
DALE ZEHNER
DATE:
APRIL 17, 2009
RE:
AUTHORIZATION TO INVESTIGATE REFUND OF SERIES 1998
COMMUTER RAIL REVENUE BONDS
RECOMMENDATION:
The VRE Operations Board is being asked to authorize an investigation of
refunding the Series 1998 Commuter Rail Revenue Bonds.
BACKGROUND:
In February of 1990, NVTC issued $79,350,000 of tax exempt Commuter Rail
Revenue Bonds to fund the establishment of VRE. In July 1993 and in March
1998, NVTC refunded a portion of the original debt in order to achieve a lower
interest rate and lower annual payments. The ability to gain an advantage from
the refunding of tax-exempt debt depends on the provisions of the bond
agreement and prevailing market interest rates.
Public Financial Management, VRE’s financial advisor for bond financing, has
calculated the net savings of again refunding the $25 million remaining balance of
the Series 1998 bonds. At current prevailing rates, the net present value savings
are estimated at $1.3 million, spread over the next six years. (Under federal tax
law, the term of the refunding bonds cannot exceed the term of the original bonds,
which were issued for 25 years in 1990).
VRE is currently pursuing several options for how to best achieve the refunding,
including the following:
•
•
•
Issuance of a refunding bond issue through the sale of tax-exempt bonds.
Our financial advisor recommends that this be a “negotiated” sale in which
one or more underwriters are chosen through a competitive process and
the terms of the bond sale is negotiated with the chosen underwriters.
Participation in a pooled financing through the Virginia Resources Authority
(VRA). VRA issues debt twice a year on behalf of jurisdictions and other
public entities throughout the state and the costs are shared by all
participants.
Issuance of a refunding bond issued through a private placement with a
competitively selected bank or other financial institution.
The objective is to maximize the net savings to VRE through achieving the lowest
possible interest rate and minimizing the costs of the transaction. The transaction
costs are significant and could be as high as $680,000 for the first option outlined
above. VRE’s intention is to pursue the refunding so long as net savings are in
excess of $1,000,000 and represent at least 4% of the value of the new debt.
This approach is consistent with the parameters used by several of the
jurisdictions and with a prior state law.
Professional staff at Fairfax County, Prince William County, and the Virginia
Resources Authority have been consulted about this refunding opportunity.
These conversations will continue as the options outlined above are reviewed.
Staff in all member jurisdictions and the Commissions will be involved in
discussions regarding refinancing options. A proposal will be brought back to the
Operations Board and Commissions later this spring. Each of the member
jurisdictions would then need to approve the issuance of refunding debt.
FISCAL IMPACT:
There is no fiscal impact associated with this investigative work.
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TO:
FROM:
DATE:
RE:
CHAIRMAN ZIMMERMAN AND THE VRE OPERATIONS BOARD
DALE ZEHNER
APRIL 17, 2009
AUTHORIZATION TO INVESTIGATE REFUND OF SERIES 1998
COMMUTER RAIL REVENUE BONDS
RESOLUTION
8F-04-2009
OF THE
VIRGINIA RAILWAY EXPRESS
OPERATIONS BOARD
WHEREAS, in February of 1990, NVTC issued $79,350,000 of tax exempt
Commuter Rail Revenue Bonds to fund the establishment of VRE; and,
WHEREAS, in July 1993 and in March 1998, NVTC refunded a portion of the
original debt in order to achieve a lower interest rate and lower annual payments;
and,
WHEREAS, VRE’s financial advisor for bond financing has calculated that the net
present value savings of again refunding the $25 million remaining balance of the
Series 1998 bonds would be approximately $1.3 million at prevailing interest
rates.
NOW, THEREFORE, BE IT RESOLVED THAT, the VRE Operations Board
authorizes an investigation of refunding the Series 1998 Commuter Rail Revenue
Bonds.
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